In the money: H&M coy around details of new brand
While H&M Hennes & Mauritz confirmed plans to launch a new brand yesterday (29 March), it has remained cagey about what form that brand will take, and what its plans are for the chain.
A spokesperson for the retailer confirmed to just-style that the new, unnamed brand will sit in a sit in a higher price segment than its other brands, which primarily cater to a young or fast fashion consumer base.
The chain, set to launch in 2013, will first open in a "European city," investor relations manager Nils Vinge told analysts after announcing its first-quarter results yesterday, but would not be drawn further on when it would launch or who it would be targeting.
However, Vinge did emphasise that the brand would not be a luxury version of Cos, but would instead "build on the positive experience of Cos".
He said the retailer's experience in successfully launching the Cos brand puts it in a good position for the launch of this new, unnamed brand. In recent years, the company has acquired brands including Monki, Weekday and Cheap Monday, while launching Cos from scratch. Of these companies, Vinge said Cos has "gone the furthest", which gives the company confidence in this new project.
The company will also work to broaden the H&M brand into new product categories and areas, said Vinge. He added that the company plans to open some 275 more stores over the coming year, with China, the US and the UK set to see the lion's share of the growth. In the autumn, the retailer will open its first stores in Latvia, Malaysia and Mexico, as well as Thailand under franchise.
The comments came as the company recorded a 4.6% increase in first-quarter net profit to reach SEK2.7bn (US$411.2m). Sales increased 13% in local currencies to SEK27.8bn. However, gross margin declined to 55.8% from 57.8% in the same period of the prior year.
Vinge attributed the decline in margin to a decision by the company not to pass on higher input costs, combined with higher expenses due to investments the company is making in strengthening the buying, production and IT divisions ahead of the launch of the new brand.
H&M expects to see the benefits of falling cotton prices going into the third-quarter, as its buying strategy means there is a "considerable lag" before the effects of lower cotton prices feed through.
He emphasised the company's long term focus, saying it would be easy for it to boost profits in the short term, for example by "raising prices and avoiding long-term investments".
"It would be easy for us, but unwise," he said. "We will always put the customer first and I am convinced that this is the right strategy going forward so we can continue our profitable growth for many years to come."
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